By Colleen Isherwood, Editor
NEW YORK — The Caribbean market continues to perform well in spite of the Zika challenges of 2015 and 2016 and last year's hurricanes, says Parris Jordan, founder and chairman of the HVS-sponsored Caribbean Hotel Investment Conference & Operations Summit.
“This shows the continued resilience of the region despite temporary setbacks,” Jordan told CLN in an interview last week. “There is continued interest among travellers and investors continue to invest in the area. We've see a relatively quick recovery.”
Investment and operations in the Caribbean will be the focus of the eighth annual CHICOS (Caribbean Hotel Investment Conference and Operations Summit), where over 300 regional and international investors and operators will get together with the region's leading decision-makers to discuss the region's markets and possibilities. This year's conference will be held at the Fairmont Southampton in Bermuda, November 8 and 9.
While occupancy year to date was down by 1.0 per cent, RevPAR was up by 2.5 per cent and ADR by 3.5 per cent, he noted. Some of the islands showed higher increases in RevPAR, with Curacao up 20 per cent, Caymans up 26 per cent, Aruba up 15 per cent and Jamaica up 8 per cent.
“Some of these islands are benefitting because travel shifted to their destinations from islands that had direct [hurricane] hits, but they would have performed well anyway,” Jordan said.
Some of the islands lost inventory, including the British Virgin Islands, U.S. Virgin Islands and Saint Martin. These islands are in the midst of the recovery process, with properties coming back into inventory this year and next.
Believe it or not, Puerto Rico's RevPAR is up 18 per cent year to date, although a lot of that is due to relief operations, as they housed organizations such as FEMA. “Approximately 75 per cent of the hotel stock is operational, especially in the city [San Juan],” said Jordan. Open hotels include the Ritz- Carlton Reserve and the St. Regis. The El San Juan, which is being converted to a Curio by Hilton, is scheduled to open in October. The Condado Plaza Hilton and Caribe Hilton should open late this year.
Other factors contributing to the recovery are the strength of the U.S. economy and continued popularity as a preferred destination for travellers. Increasing airlift, and airport
renovations/expansions have helped drive performance, with American Airlines, Delta, JetBlue and Spirit all increasing the frequency of their Caribbean flights.
Driving capital to the region
After Hurricanes Irma and Maria, a lot of investors were expecting
distressed assets at under market value. This hasn’t been the case, Jordan noted, as properties have been able to maintain their value.
International investors from North America
(U.S. and Canada), Europe, Asia and Middle East continue to show interest in the
region – deals are island by island and asset by asset specific.
There are many large development projects
under construction and scheduled for development in Bermuda, Dominican
Republic, Jamaica, Bahamas, Jordan said. In Bermuda, the St. Regis is undergoing a $150 million renovation and the Ritz-Carlton Reserve is under construction. In the Dominican Republic, a thousand-room complex, Lopesan Costa, is under construction. The Four Seasons Dominican Republic is being developed by Grupo Cisneros out of Venezuela. In the Bahamas, Bahia Mar, a $4.2 billion multi-year project, owned by Chow-Tai-Fook Enterprises Ltd., has 2,300-rooms open and is operational.
Multimillion dollar renovations have been completed in the region e.g., in Bermuda and Curacao (both unaffected by the hurricanes), and on islands impacted directly by the hurricanes, including USVI, Puerto Rico, BVI and Saint Martin. These renovations include:
— Rosewood Tuckers Point, Bermuda, reopened in April following a $25 million renovation.
— Hyatt Aruba underwent a $12 million renovation.
— The El San Juan in Puerto Rico was in the midst of a $65 million renovation when Hurricane Maria hit last year, and is now being renovated to become a Curio by Hilton.
— The Marriott Curacao underwent a more than $30 million renovation.
All inclusives attract new investors
Hotel companies looking to expand in the region include both
traditional and well-established U.S. flags and all inclusive hotel chains which
are securing a larger footprint and greater penetration in the region. “This
asset type is garnering greater interest,” said Jordan. “Before, all-inclusives were seen as a cheap vacation, but now they are becoming much more attractive to both investors and visitors. They have high margins in areas where labour costs are low and airlift is strong.”
Institutional investors and private equity investors are looking at this asset class, “but it requires a special skill set and not every operator understands the operating model,” said Jordan. “Historically, operators were locally grown Caribbean operators or Spanish all inclusive brands. Now, some of the U.S. brands are becoming more aggressive, as they understand how profitable these assets can be.”
continues to be a preferred destination for visitors
financing is as high as it has been during past decade, since 2008,” said Jordan. “Despite challenges such as hurricanes, seasoned investors understand that hurricanes
are part of the region.”
Investors are seeking more attractive yields
in the Caribbean – since attractive yields in the U.S. are becoming more difficult, as it is very
competitive to acquire quality products at a reasonable price.
“Before 2007, there was a lack of discipline, with a lot of lenders relying on sale of real estate to make the deal work. Canadian banks have always loaned and stayed, including CIBC FirstCaribbean, Scotiabank and RBC.
“Debt financing more readily available than
years past – although lenders are selective,” Jordan added. “I have more than a handful of
lenders speaking at CHICOS this year – three years ago there were none.”
Threats in the region include the following:
— Visitor Perception that islands may not be
ready for visitation. The Caribbean needs to be pro-active and better prepared
to respond to crisis – for example, hurricanes messaging is important and governments
and hoteliers need to work together to put a plan in place and execute when there
is a crisis.
— New supply expected to enter the market,
especially in Dominican Republic
— Airbnb expanding in some islands – can impact
— Caribbean is a mature market, and while new supply
entering the region should improve marketing in anticipation of attracting new
demand, other regions are becoming increasingly competitive.